Talk:Return on assets

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Comments[edit]

"NI/Average Total Assets" is an inconsistent application of accounting principles. When calculating any return measure using total assets as the denominator, the implicit assumption is that no debt is being utilized (since A = Total L + SE). Thus, one must exclude interest expense from the profit metric. In this case, the correct profit measure is "NI + Interest Expense * (1-Effective Tax Rate) + Non-Controlling Interest in Earnings". For a more detailed explanation of this concept see 'Financial Reporting, Financial Statement Analysis and Valuation" by Wahlen, Baginski, Bradshaw.74.108.95.239 (talk) 15:12, 5 December 2015 (UTC)[reply]

Isn't the correct formula [Net Profit - Tax - Interest]/[Average Total Assets]? --NBA-Forum.net 03:37, 5 October 2005 (UTC) who knows man ya[reply]

Agree completely, have modified to reflect.--Gregalton 11:10, 29 March 2007 (UTC)[reply]

From "Principles of Accounting" By Belverd E. Needles, Marian Powers, Susan V. Crosson pg 209, "Return on assets = Net income/Average total assets". This is also the most common definition in my experience. Several other definitions are used in practice though. 72.165.151.242 (talk) 15:21, 20 November 2012 (UTC)WSJevons[reply]

I have changed it to the correct definition of Average Total Assets. This is the most common definition and the one used in the citation. Other, alternative measures to evaluate asset efficiencies are certainly used, but "Mode of Total Asset" is completely nonsensical. 63.147.189.227 (talk) 17:20, 30 November 2012 (UTC)WSJevons[reply]

ROA in manufacturing industries[edit]

Is ROA not an useful measure for calculating the efficiencies of manufacturing industries. As an afterthought will it be useful to use the written down value of the assets used in the manufacturing process?220.226.40.11 14:50, 29 May 2007 (UTC)[reply]

My textbook (Key Management Ratios - Ciaran Walsh) uses EBIT/TA for defining Return on total assets. Am I wrong someway? —Preceding unsigned comment added by 79.40.68.117 (talk) 13:07, 19 October 2008 (UTC)[reply]